Integrating Sustainability in Corporate Strategy
For this week’s article I am proposing an altered version of the first paper I wrote for tthe sustainable strategy seminar during the course of my MBA in Sustainable Business and Energy at Presidio Graduate School.
The main problem with integrating sustainability in Strategy is where and how you implement it. There are two main options :
- Companies believe Corporate Social Responsibility (CSR) is just another department and add sustainability bit by bit to their activities. This was the prevalent method until recently ;
- Alternatively, companies can put Sustainability front and center of the company’s strategy, embedding it truly at the core of everything they do.
The second option is preferrable to the first. We shall see why in the pages below. Let us start with two recent counter-examples of CSR as just another Department within companies or just as a marketing ploy:
I still remember vividly when British Petroleum (BP) announced they were moving Beyond Petroleum. It took less than ten years to see that this grandiloquent vision and these high hopes were just mere greenwashing, not a real effort.
Sure billions were invested in “ alternative energy “ but more as a way to lure investors and quiet the public than anything else. The company never had the vision, the drive, to shift away from fossil fuels as their core of their business. Since then, the company sold its “ green “ credentials and went back to Business As Usual.
More recently, one can mention the German company Volkswagen (VW) and its huge emissions scandal. The company lied and cheated about its cars’ air pollution. 11 million cars have been concerned since 2009. The recent legal settlement will cost the firm upwards of $10 billion for the United States alone. This cheating, this greenwashing, is the opposite of CSR. This is even more contrasting since the company had become the world’s #1 carmaker thanks to the perceived quality of its vehicles.
As these examples have shown, sustainability as just a moral obligations of our times, a passing fad, or worse, a greenwashing tool, is not going to lead a company anwhere. Strategy without Commitment or Vision is like Science without Conscience, the ruin of the soul. ( Rabelais, French philosopher…)
On the opposite side of the spectrum, reading for last summer’s Strategy classes both Conscious Capitalism and Firms of Endearment have taught me that when companies truly embrace Sustainability and “ get it right “ they are more profitable than their counterparts.
This can be explained by multiple reasons : energy, water and resources are better used, waste is decreased or simply eliminated with cradle to cradle approaches, employees are truly empowered, customers and external stakeholders are actually listened to… this is an overhaul of Business as a whole.
And this is not easy to do. As we learned last summer with Collins and Porras, this demands both a core ideology and an envisioned future. This will require a fundamentally different vision, other values… But not putting sustainability at the front and center of the corporate strategy would make it very difficult to make the message / the vision sound and look right as the examples above have shown.
This evolution of corporate strategies reflects the changing times. Our societies and civilizations as a whole need to change. Wicked problems such as global weirding or social changes – Women and minorities alike are increasingly demanding equality – cannot be dealt with business as usual thinking.
As Winston Churchill said in 1936, “The era of procrastination, of half-measures, of soothing and baffling expedients, of delays is coming to its close. In its place we are entering a period of consequences.”
Some firms already have started. “ Screw Business As Usual “ said Richard Branson in a recent book, the serial entrepreneur of genius behind Virgin.This new strategy, this paradigm shift, is going away from a model that prefers short term financial returns to a more sustainable vision based on long term plans, improving the society at large as well as the environment.
These are new business models being invented. Unilever and other companies show it with their new products and services in developping nations as we saw in The Fortune at the Bottom of the Pyramid.
And this long term view is even starting to make its way in political circles as Hillary Rodham Clinton, the Democratic Nominee for this year’s elections is willing to eschew quarterly report in favour of a more long term approach of business.
Some analysts argue that CSR is dead. I would agree as CSR as a small underfunded department within a company is dying. Now is the time for Sustainability as a core value. Now is the time for reinventing the Art and Science of making business with other values than profits as a guiding star.
To infer this reflection, this new situation is, I believe, a huge opportunity for the Pinchot / Presidio communities as more businesses and communities will as time goes, embrace Sustainability as a core value and vision.